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Pay Yourself First, Because No One Else Will


Any retirement planning should begin sooner rather than later, as time is not forgiving for those who wait. The earlier you start saving the more opportunity you have to build a portfolio of growing assets and peace of mind.

When a professional first begins practice, the primary goal is to meet expenses. After which the goals are to continually improve the practice by serving patients well and increase profitability by keeping a positive cash flow and growing net income. However, the importance of retirement planning should not be underestimated.

The need to start saving towards retirement

Financial experts and related articles continually urge that any retirement planning begin sooner rather than later, as time is not forgiving for those who often wait. The earlier you start saving the more opportunity you have to build a portfolio of growing assets and peace of mind. Action steps require some level of planning by obtaining information on how the process of implementation is best used to attain desired goals (i.e., retirement funding, purchase home or car, education for children, travel, etc.).

For those who think Social Security will be sufficient to meet required retirement expenses, think again. In reality, 48% of U.S. households do not save and more glaring is the fact that over 65% of American adults do not have any emergency funds (three to six months of cash on hand to cover monthly expenses) set aside, according to the U.S. Federal Reserve Board. To compound these findings, the retirement age for receiving full Social Security benefits is creeping up and life expectancies are increasing. In other words, you will likely wait longer to receive your full retirement benefit and will statistically live longer.

These factors alone should alert everyone to the importance of not waiting to start a savings program and begin the process of building an asset base, as you will need them most during your retirement years! A recent survey from the Employee Benefit Research Institute revealed that nearly a third of workers are not confident they’ll have enough money to retire comfortably.

Retirement plan savings and choices

The options available for retirement savings and investing are innumerable. However, the requirements and availability of options are often limited due to a whole host of equally daunting factors. The intent of funding a plan is only a small part in the retirement funding puzzle. Many questions pose themselves and only individuals well versed in the constantly changing maze are equipped to help guide you to realizing your goals.

For example, are you a solo practitioner or do you practice in a group? Do you plan on including your staff in a plan? Can staff be excluded legally and if so how? What are the advantages to an owner by having staff participate? Do you want a qualified or non qualified plan and do you know the difference? What are the tax benefits and potential pitfalls of participating in a plan? Once a plan is selected and funded, are you required to maintain annual contributions? May you increase or decrease the amount contributed? What are the vesting requirements for ownership of plan assets? Does the plan require annual actuarial review or not?

There are additional questions to be answered before selecting a plan. A plan that adequately and appropriately suits the owner and employees must be fully vetted to ensure appropriate participation.

The process and implementation may be simple or complex depending on the determined needs and requirements of the owner and staff — all the probable participants.

Once questions are answered and decisions made, the following plans may adequately suit the needs of the owner and participants: defined contribution or benefit, profit sharing, SIMPLE, SEP, Keogh, 401(k), money purchase, age weighted, target benefit, cash balance, safe harbor plans and more.

The contribution to an IRA or Roth IRA may be done individually and unrelated to an employer’s plan. However, in certain circumstances this option may be curtailed or eliminated. It is best to speak with your tax professional prior to making any contribution.

Choose wisely

It becomes abundantly clear the choices for retirement planning and subsequent investing may become overwhelming if not cumbersome. Retirement planning is not the end all but a part, albeit large portion, of asset accumulation.

The need for assets is continual as you go through life and its challenges. The goal is to meet each need and have the fortitude to stay the course to reach your ultimate goal. It is never too late to begin your financial journey, although earlier is better than later.

The importance of selecting a professional with knowledge and experience to assist you with your journey towards your goals is similar to a patient selecting you for their health care needs. Patients entrust their needs and goals in you and your expertise. Your choice in selecting a Certified Financial Planner is akin to a patient selecting a doctor — ensure you select a fiduciary with the same professionalism, expertise and knowledge you would expect to offer a patient.

One more thing: do not forget to pay yourself first!

H. William Wolfson, DC, FICC, MS, MPAS is a financial consultant and advisor. After passing the rigorous Certified Financial Planner examination, Dr. Wolfson obtained a Master of Science in Personal Financial Planning from the College for Financial Planning. He was subsequently awarded by the College a Master Planner Advanced Studies. Dr. Wolfson is a member of the Financial Planning Association (FPA). Dr. Wolfson retired after 27 years of active practice and remains active volunteering his expertise to the continued education and success of professional colleagues and investors. Dr. Wolfson may be contacted at drhwwolfson@gmail.com.

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